WebSocket Under the Hood: How Real-Time Crypto Exchanges Work

WebSocket Under the Hood: How Real-Time Crypto Exchanges Work

If you’ve ever watched cryptocurrency prices update in real time or received instant notifications on a trading platform, you’ve already experienced the power of WebSocket technology. In this article, we’ll take a deep dive into how WebSocket works behind the scenes, using a crypto exchange as a practical example. Whether you’re a beginner system analyst, a developer, or just curious about modern web technologies, this guide will help you understand the magic that makes real-time web applications tick.

Who Should Read This?

This article is perfect for you if:

  • You’re a beginner system analyst wanting to understand complex web applications.
  • You’re interested in how frontend and backend communicate in real time.
  • You’re curious about how WebSocket technology works in practice.

What Will You Learn?

We’ll cover:

  • How data is exchanged between your browser and a crypto exchange server using WebSocket.
  • How to ensure your connection is secure and your data stays private.
  • The impact of WebSocket on server performance and scalability.
  • What happens when thousands of users connect at once.

Ready to peek under the hood? Let’s get started!

Real-Time WebSocket Example: Crypto Exchange

Imagine a cryptocurrency trading platform where speed and accuracy are critical. When you see Bitcoin prices update instantly or receive trade notifications, that’s WebSocket in action. Unlike traditional HTTP, which requires repeated requests, WebSocket establishes a persistent, two-way connection between your browser (frontend) and the server (backend), enabling real-time data flow.

Frontend and Backend: How They Communicate

  • Frontend: This is what users interact with—charts, buttons, and dashboards. When you open the site, the frontend initiates a WebSocket connection to the backend.
  • Backend: The brains of the operation. It processes requests, interacts with databases, and sends real-time updates (like price changes or trade confirmations) back to the frontend.

Typical Data Flow

  1. User opens the trading platform.
  2. Frontend establishes a WebSocket connection with the backend.
  3. Backend streams real-time data: price updates, trade notifications, etc.
  4. Frontend displays this data instantly to the user.

How to Check for WebSocket Connections

Want to see WebSocket in action? Try this:

  1. Go to https://www.bybit.com/en
  2. Open your browser’s Developer Tools (usually F12).
  3. Navigate to the Network tab.
  4. Filter by WS (WebSocket).
  5. Click on a connection to inspect headers and data frames.

If WebSocket is being used, you’ll see active connections, request/response headers, and real-time data frames being sent and received.

What Happens Under the Hood? Backend WebSocket Workflow

1. Establishing the Connection

  • The frontend sends an HTTP request with the header Upgrade: websocket.
  • The backend checks the request and, if valid, responds with 101 Switching Protocols, upgrading the connection to WebSocket.
  • From this point, communication switches from HTTP to WebSocket.

Key Headers:

  • Request URL: The WebSocket server address (e.g., wss://... for secure connections).
  • Request Method: The HTTP method used for the handshake.
  • Status Code: 101 Switching Protocols confirms the upgrade.

Request Headers:

  • Connection: Upgrade and Upgrade: websocket signal the protocol switch.
  • Sec-WebSocket-Key: A random key for the handshake.
  • Sec-WebSocket-Version: Usually 13 (the standard version).

Response Headers:

  • Connection: upgrade and Upgrade: websocket confirm the server’s agreement.
  • Sec-WebSocket-Accept: A server-generated key to validate the handshake.

2. Data Exchange

Once connected, data flows both ways in real time. You can view this in the Messages tab of your browser’s DevTools:

  • Incoming (⬇️) and outgoing (⬆️) messages
  • Timestamps for each message
  • Message content (text or binary)

The backend processes client messages (like data requests), interacts with the database, and sends responses back instantly.

3. Keeping the Connection Alive (Ping/Pong)

To ensure the connection is still active, the client and server periodically exchange ping and pong messages:

  • The client (or server) sends a ping.
  • The other side replies with a pong.
  • If a pong isn’t received in time, the connection is considered lost and is closed to free up resources.

Tip: Either side can initiate a ping according to the RFC 6455 standard. The important part is that the recipient must reply with a pong containing the same payload.

4. Closing the Connection

If the server doesn’t receive a pong response, it closes the connection. This helps prevent resource leaks and ensures only active clients remain connected.

Security: Why WSS Matters

Security is crucial, especially for financial data. Here’s how WebSocket connections are secured:

  • WSS (WebSocket Secure): Like HTTPS, WSS encrypts all data using TLS/SSL. Always use wss:// for sensitive applications to prevent data interception.
  • Authentication & Authorization: Users must authenticate (e.g., via API keys or tokens) before establishing a WebSocket connection. The backend verifies credentials before allowing access.
  • Rate Limiting: The backend monitors request frequency to prevent abuse (like DDoS attacks). Excessive requests from a single client can trigger temporary blocks.

How to Check:

  • ws://... indicates an unencrypted connection (not recommended for sensitive data).
  • wss://... means the connection is encrypted and secure.

WebSocket and Server Performance

WebSocket enables fast, efficient data transfer, but it also increases server load—especially with thousands of simultaneous users. To handle this, modern platforms use:

  • Load Balancers (e.g., Nginx, AWS ELB): Distribute connections across multiple servers.
  • Clustering: Multiple servers work together to handle requests in parallel.
  • Message Queues (e.g., RabbitMQ, Kafka): Manage and distribute data streams efficiently.

WebSocket: Pros and Cons

Advantages

  • Low Latency: Instant, two-way communication without repeated requests.
  • Reduced Overhead: After the initial handshake, data is sent in a lightweight format, saving bandwidth.
  • Efficient Resource Use: No need for constant polling; both client and server save processing power.
  • Scalability: Ideal for high-traffic, real-time systems like social networks or trading platforms.
  • Simpler Architecture: Eliminates the need for workarounds like AJAX polling.

Disadvantages

  • Resource Consumption: Each open connection uses server resources. Unlike HTTP, connections stay open.
  • Scalability Challenges: Managing stateful connections across servers is more complex.
  • Overkill for Simple Apps: For static sites or apps without real-time needs, HTTP + AJAX is simpler and sufficient.

Best Practice: Use WebSocket only when your application truly needs real-time, bidirectional communication.

Conclusion

We’ve explored how WebSocket powers real-time features on crypto exchanges, how frontend and backend interact, and how security and scalability are managed. Understanding these fundamentals will help you design, analyze, or debug modern web applications more effectively.

Pro Tip: Always prioritize security (use WSS), monitor server load, and choose WebSocket only when your use case demands it.

Stay tuned for the next part, where we’ll discuss how to test WebSocket connections and ensure your real-time apps work flawlessly!

Have questions? Drop them in the comments—I’m happy to help! 😊